Obviously, this is an abbreviated answer to your question, but perhaps the most important point is this: Due diligence is critical to successful real estate investing.

I have been discovering the true essence of Due Diligence the past two weeks with the hunt for my first multi family property.

I don't care about physical condition of property, as long as it's a good deal - I'll do the rehab..Yes, you need to be more diligent (or at least as diligent as BP guide recommends) than you would if you were renting to high-income earners in a Palo Alto SFR.

Scott The Book on Flipping Houses, The Book on Estimating ReHab Costs http://www.biggerpockets.com/flippingbookConsider checking out HUD homes for small multi's owner occupied gets first crack.Download BP’s newest book here some good due diligence in Chapter 10.

Buy used hvac units and cut your costs by 1-2KPut it under contract ASAP with a out for due diligence.

I'm wondering how to go about due diligence without sinking the deal in transaction costs?  

Download BP’s newest book here some good due diligence in Chapter 10.

PLEASE do  your due diligence on any property you plan to bid on, because you can really get screwed.

Download BP’s newest book here some good due diligence in Chapter 10.

As an investor you get paid for making 'business decisions' and being a strategic thinker; not to being stuck in the mud doing paperwork, pulling plat maps off microfiche, and compiling due diligence documents.